Health club owners often make use of limited budgets, especially when the doors first open. Limited cash flow is the primary reason why it is vital to account for every dollar that comes in and out of your health club business.
When starting your health club business, you will be confronted with a mass amount of expenses including but not limited to renting or purchasing the actual facility, equipment purchase or leasing, hiring managers, hiring other staff and personal trainers, and of course management software to aide you in running your new business. At this stage, most likely, you will be operating at a loss. This is common in the fitness industry business. To survive, business owners need to be vigilant and adhere to a effective cash flow management systems.
If your club is operating for a substantial amount of time without positive cash flow, your gym operation, without a doubt will be negatively affected, unless you are wealthy and operating the gym more like a hobby then a means to put food on the table. There are many factors to take into account to have an effective cash flow management system including but not limited to the salaries paid to both employees and independent contractors, purchases and rentals, electricity, water, and general maintenance. Payment for these factors cannot be deferred. Also you need to consider budgeting emergency purposes, such as the break down of electric motor( treadmill), broken glasses, repairs of our equipments and etc. Without sufficient cash flow, a health club business cannot operate properly and you will likely have extra medical bills due to your own stress level!
A health club owner can adopt the following measures to improve cash flow:
1. Have an on time collection procedure, like a comprehensive gym management system and payment processing like Insight!– utilizing a gym membership management system will keep you in the know of exactly when your members are set to pay you, which of them are about to go into default, or are already on their way to collections. Do not let your hard earned money get away from you because you cannot track when you are to be paid. If you are offering a great facility with outstanding customer service, you will need a membership software system to make sure you are getting paid on time so your business can grow.
2. Offer rebates or discounts for early payments give 5-7% discount on monthly membership if they pay in advance or pay before the deadline. This can be exceptionally helpful when doors are first opened!
3. Offer promotions such as “pay 5 months advance and get the 6th month for free”! Clients usually take this offer as this is a substantial discount of 20%. You will be able to secure payments for 6 months, even if your facility does not require contracts.
4. Cut down on electricity, and keep a close eye on equipments that use electricity such as heaters and air-conditioning units. If you are not running a 24 hour staffed facility and/or there wide gaps of down time throughout the day, you can turn off non-essential equipments when no one is using them.
5. Have a strong audit procedure to monitor the expenses of your business.
6. Pay taxes on time. You definitely do not want to be penalized by the government for failure to pay taxes on time.
7. Professionalize your finances. As a small business owner, one can also be tempted to take out money from the business, this should not be the case! Instead, pay yourself a salary and stay legitimate. You deserved to be paid too since you are working your butt off in overseeing and managing the operation of your gym business.
8. Negotiate. It never hurts to ask for discounts from your landlord if you early; you never know until you ask for it. Some landlords give up to 10% discount on rental if you pay on time or before the deadline.
Gym owners should have a goal to become and remain profitable and legitimate by tracking expenses and payments along the way. Keep your books detailed and clean so nothing comes back to haunt you. Start by adopting these measures and by getting Insight!
By Chris U. ~Gym Owner and Operator of Bulldog Gym